Using a mediator for lamily business disputes E

T* woRD "coNFlrcr" HAS gotten a I lot ofbad press.

Rather than seeing conflict as a natural and predictable aspect of human interaction-a process that, if managed properly, can often lead to growth and new solutions-people tend to see it as a failure on the part of the disputants. This is unfortunate, because conflict, when channeled positively, can be a creative, energizing, and even a healing force.

In family businesses, where the twin currents of family and business run through so many decisions, conflict is inevitable. While conflict presents challenges for any organization, internal conflict in family businesses has a special complexity.

It is often the product of experiences preceding, and factors outside of, the business issues that spark the immediate dispute. The conflict may have started years earlier on the playground, around the dinner table, in birth order. or even in a previous generation. The history may be silent, invisible, half-forgotten, but it is often a powerful presence in the conference room. I have seen businesses become stymied by conflict that has little or no connection to the business problem at hand.

The process of mediation can play an invaluable role in resolving family business conflicts. It can direct energy away from old grievances and toward finding business solutions for business problems and preserving working relationships. For a family business, protecting working relationships is not a luxury; it is a necessity.

A mediator is a neutral outsider who works with all the involved parties to craft a resolution. Unlike an arbitrator, a mediator does not mandate a settlement; rather, he or she helps the parties communicate and develop a mutually acceptable solution. Compared to other options for resolving disputes, mediation is quick, inexpensive, and private.

It is also an informal process, not limited by rules of evidence, procedure, or remedy. Because of this, mediation allows for maximum flexibility in crafting a resolution acceptable to all parties. Because of the informality and the guided, mutual communication, a mediated, as opposed to arbitrated, settlement has a better chance of soothing not just the business problem but also the troubled relationships that exacerbated it. Mediation for family businesses is occasionally practiced by legal professionals, but more often it is performed by non-attorneys such as family business consultants who have some conflict resolution experience. The mediator's skills lie in helping parties come to the same table, communicate, and work out their own solutions in a non-adversarial environment.

"Non-adversarial" does not mean that there is an absence of conflict or that antagonisms cannot be expressed during the mediation. Instead, nonadversarial refers to the process used to air and resolve the dispute. The skilled mediator does not put constraints on the discussion, but rather helps keep the focus on the parties crafting a solution. Thus, the mediation allows discussion on the source and substance of the conflict and helps people recognize their counterproductive patterns, with the aim of being able to move past them toward a businesslike, problem-solving mode.

Long-standing resentments have a place at the table, insofar as people can come to see how those resentments are standing in the way of the ultimate task at hand. Mediation, then, cannot only result in specific terms of agreement, but can also offer an enormous advantage to a family business: the parties learn that they can communicate further and/or differently in the future. Under the mediator's guidance, once they accomplish this, future productive interaction will no longer seen inconceivable.

Mediation in action

In a successful family business, a medical equipment company founded by two brothers, only one member of the second generation (the older brother's daughter) chose to enter the firm. Her brother pursued an academic career, and their cousin, the only son of the younger founding brother, went to work at a consulting firm. After several years, the daughter became c.f.o. Her father had retired (retaining his interest in the business), and she reported to her uncle, the c.e.o.

Problems developed when the cousin was laid off by the consulting firm and wanted to join the family business-as a vice president with a seat on the management committee and compensation equal to his last salary (which would be 20Vo higher than the daughter's compensation). The daughter expressed concern about his lack of experience in their indus- try, and discreet indignation about his compensation requirements. Worried about being marginalized if her uncle and cousin were both active in the company, she went to her father and he entered the discussions.

Things escalated. The disagreement over how to accommodate the cousin became an unspoken but seriously disruptive conflict. The unwillingness to communicate about this issue became a refusal to communicate about other management issues. The three vice presidents, who were not family members, felt hamstrung. Key processes and initiatives became compromised.

The founding brothers, who had always successfully worked together, were each secretly consulting attorneys. Family dinners became a thing of the past. Finally, after several months, the vice president of human resources urged the brothers and their two children to try mediation for the sake of the family enterprise.

The mediator explained that, under her guidance, they would do the difficult work of devising a solution. Sometimes she had all of them at the table, and sometimes she spoke with one or two of them privately. (In situ- ations where suspicions run high, mediators will often make sure to balance their separate communications, giving each party equal individual conference time.)

She helped the parties recognize and cope with the frustrations and emotions that fueled the conflictmuch of which began during long ago family interactions-and to focus on the future of the business.

At the end of five hours, the recriminations and allusions to legal action had ceased. The four parties agreed that the cousin would come into the business at the same compensation as the daughter but would have a one-year probation/learning period during which time he would report to a vice president, while the daughter would continue to report to her c.e.o. uncle. The cousin could attend management committee meetings by invitation, but would not have a vote. At the end of one year, the management committee would review the cousin's performance and decide as a group about promotion.

In addition, the c.e.o. committed to keeping both his son and his niece in his communications loop, simultaneously, and to respect normal manage- ment communication channels. Finally, they agreed that the c.e.o., his son, and his niece would meet once a week for at least the following four weeks to confirm that their hard-won arrangement was working-and the retired brother agreed not to intervene. Their resolution worked because they had devised it themselves and because it established a sound basis for going forward. It was good for the business, and it was good for the family.

A longstanding or valuable relationship might be at stake in a dispute with an outside party. It is always at stake when conflict erupts within a family business. A skilled mediator is often the best option to help family business members resolve the problem at hand and to avoid rePeating old, counterproductive patterns in the future.

- Bernard Kliska is an associate of the Family Business Consulting GrouP, Marietta, Ga.; (800) 551-0633. He can be reached at kliska@ efamilybusiness .com. Reprinted with permission from The Family Business Advi;or, a copyrighted publication oJ Family Enterprise Publishers. No portion of this article may be reproduced without permission of Family Enterorise Publishers.

Rick Danielson, v.p.-sales, Allweather Wood, Washougal, Wa., has retired after 18 years with Allweather and 38 years in the industry.

Kevin Henley has been promoted to sales mgr. for Redwood Empire Wholesale, Morgan Hill, Ca. Greg Sanchez, ex-Allweather Wood, is new to sales in San Jose, Ca.

Jeff Tant is now running the southern pine lumber department at Buckeye Pacific, Portland, Or. Dan Alar now leads the OSB & panel department.

John Picot has retired after 30 years in lumber sales, the last 13 with Sierra Pacific Industries, Anderson, Ca.

Bruce Huewe has ioined Boise Cascade Building Materials Distribution, Riverside, Ca., as Simpson Strong-Tie product mgr.

John F. Ferguson is now a Sisters, Or.-based broker with Remax Town & Country Realty, following 34 years in the lumber industry, most recently with Rough & Ready

Lumber Co., Cave Junction, Or.

Miguel Hernandez, ex-North Pacific, is now key accounts sales mgr. at Building Materials Distributors Inc.. Riverside. Ca.

Al Gedroez, ex-Collins Pine, is new to sales at Simpson Lumber, Tacoma, Wa.

Scott Rimmer, ex-Forest Grove Lumber, is new to sales at Disdero Lumber, Clackamas, Or.

Jules Plavin, Western International Forest Products, Portland, Or., has retired after 30 years in the industry. Charlie Palmer, ex-Sherwood Lumber, has joined the trading staff.

Lori Burke was promoted to the new position of product specialist of the Spectrum Division at Timber Products Co., Springfield, Or.

Tom Ray has been promoted to v.p.Northwest resources & manufacturing for Plum Creek, Columbia Falls, Mt. He succeeds Hank Ricklefs, who has retired after 23 years with the company.

Michael D. Mahre, ex-SelectBuild, has joined ProBuild Holdings, Denver, Co., as senior v.p. of corporate development.

Robert Mellor, ex-Building Materials Holding Corp., has been elected to the board of directors of Stock Building Supply, Raleigh, N.C.

Allan Trinkwald, Simpson Lumber Co., Tacoma, Wa., was elected chairman of the Western Wood Products Association, succeeding Eric Schooler, Collins Cos., Portland, Or. New lst vice chairman is Bob Lewis, Columbia Vista Corp., Vancouver, Wa.; 2nd vice chairman Steve Zika, Hampton Affiliates, Portland; presidenVc.e.o. Michael O'Halloran, and new board members Sherm Anderson, Sun Mountain Lumber, Deer Lodge, Mt.; Dan Claridge, Thompson River Lumber Co. of Montana, Thompson Falls, Mt.; Fritz Mason, Georgia-Pacific, Atlanta, Ga., and Tom Shaffer, Neiman Enterprises, Hulett, Wy.

Jake Tarry, ex-Real Stone Source, has joined Laticrete as technical sales representative for Oregon, also supporting Central and Northern California and Northern Nevada.

Bob Taylor, president and c.e.o., Do it Best Corp., was elected chairman of the board of the National Association of WholesalerDistributors.

Marvin Brown, Oregon state forester, has been elected chair of the independent board of directors for the Sustainable Forestry Initiative. Robert "Bob" Luoto. American Loggers Council, is now vice-chair. Christopher A. "Chris" Wood, president and c.e.o., Trout Unlimited, joins the board's environmental chamber, and William V. "Bill" Street Jr., International Association of Machinists & Aerospace Workers, represents labor as a member of the social chamber.

Tony McRae, ex-Canadian Forest Products, is the new sales mgr. at Imperial Shake, Maple Ridge, B.C.

John Stegeman, ex-Ferguson, has joined HD Supply. as executive president, overseeing divisions HD Supply Canada, HD Supply

Electrical, HD Supply Plumbing/ HVAC, HD Supply Waterworks, and HD Supply White Cap.

Kevin Ketchum has joined North American Wholesale Lumber Association, as director of marketing & communications.

Steve Tourek, senior v.p. and general counsel for Marvin Windows, was named president of the board of directors at the Tropical Forest Foundation.

Tad Short is handling accounts payable for Mungus-Fungus Forest Products, Climax, Nv., according to co-owners Hugh Mungus and Freddy Fungus.

California Dealer Piedmont Smacked by Fire, Creditors

March was a tough month for Piedmont Lumber & Mill Co., Piedmont, Ca., which was hit with loan-default actions on several of its properties, a federal lawsuit over employee benefits, and a fire that destroyed its store in Walnut Creek, Ca.

On March I, Umpqua Bank filed suit for breach ofcontract and warranty against Piedmont Lumber, owner William C. Myer Jr., and his wife, Victoria Myer. According to court records. the owners have defaulted on nearly $ l5 million in loans.

The l4-count lawsuit seeks judicial foreclosure of the company's properties in Pittsburg, Tracy, Mendocino County. and Lake County, Ca.

On the same day, Northwest Administrators Inc. filed a federal lawsuit against Piedmont Lumber, alleging that the chain has not made required contributions to the pension fund of unionized employees, which it agreed to do based on collective bargaining.

On March 13. a four-alarm fire destroyed Piedmont's store in Walnut Creek, Ca., causing an estimated $5 million in damage.

An eyewitness reported that firefighters were confronted by exploding cans of paint that flew out of the building. Authorities are still investigating the cause of the blaze, which has been called "suspicious" by local newspapers. Although it was a Saturday, the store was closed-as it had been for several weekends.

Seven months earlier. a fire at the company's store in Pittsburgh, Ca., destroyed several exterior lumber racks. Investigators have labeled this fire as arson, but believe it has no connection to the latest fire.

Ghain Grows Business by Customizing Inventories

Miner's Ace Hardware, which has six locations on California's Central Coast, keeps garden center sales strong by allowing its nursery managers to tailor inventory to the local market.

At the garden center in Atascadero, nursery manager Debbi Arnold stocks plants that can withstand winter freezes. summer heat. and ravenous deer. Plants for fire-resistant landscapes are also offered.

Due to the economy, she's also stocking more perennials than in the past, as budget-conscious gardeners